At the center of the government's insider trading case against a former portfolio manager at the hedge fund SAC Capital Advisors is a trade that directly involves Greenwich resident Steven A. Cohen, the billionaire owner of the fund.

New details about the case have emerged that could cast doubt on the way that trade has been portrayed by the authorities, suggesting a possible line of defense for the portfolio manager and raising questions about whether the government will be able to build a case against Cohen, who has long been in the cross-hairs of an investigation for insider trading on Wall Street.

Federal prosecutors have claimed that Stamford-based SAC dumped millions of shares of two pharmaceutical companies in 2008 after the former employee, Mathew Martoma, received secret information from a doctor about problems with a new Alzheimer's drug.

In bringing its charges, the government said that SAC not only sold out of its position, but also bet against -- or shorted -- the drug companies' stocks before the public announcement of the bad news. The SAC short position, according to prosecutors, allowed it to earn big profits after shares of the companies, Elan and Wyeth, plummeted.

"The fund didn't merely avoid losses, it greedily schemed to profit further by shorting Elan and Wyeth stock," said April Brooks, a senior FBI official in New York, during a news conference on Nov. 20, the day Martoma was arrested.

Internal SAC trading records, according to people directly involved in the case, indicate that the hedge fund did not have a negative bet in place in advance of the announcement of the drug trial's disappointing results. Instead, the records indicated that SAC, through a series of trades, including a complex transaction known as an equity swap, had virtually no exposure -- neither long nor short -- heading into the disclosure of the drug data.

A different narrative surrounding the firm's trading could help Martoma, who has pleaded not guilty to securities fraud and conspiracy in what the government calls the most lucrative insider trading case ever charged.

The government, however, does have powerful evidence against Martoma. Prosecutors say the fund avoided losses by selling its roughly $700 million stake in Elan and Wyeth. If, as the government says, Martoma caused SAC to sell the shares -- and then short them -- while possessing important, nonpublic information, that would constitute an insider trading crime. And prosecutors have secured the testimony of the doctor who says he leaked the drug trial data to Martoma.

Still, perhaps more important, the trading records may complicate a government effort to pursue a case against Cohen. The SAC founder has not been accused of any wrongdoing, and has said he acted appropriately at all times.

In bringing charges against Martoma, prosecutors appeared to be circling nearer to Cohen. The criminal complaint against Martoma noted that Cohen had spent 20 minutes on the telephone with the portfolio manager the night before SAC began selling its shares. Prosecutors have not claimed that Cohen knew that Martoma had confidential information about the drug trials. (Martoma has refused so far to cooperate in helping the government build a case against his former boss).

Yet if the 2008 trade is a possible avenue for the government, it is running out of time to bring a case against Cohen. Under the statute of limitations for insider trading crimes, the government would have to file a criminal case against him by mid-July. That deadline is the five-year anniversary of the trade in question, unless it could prove a conspiracy with Martoma that continued well past then.

Prosecutors have not sought to reach a "tolling agreement" with Cohen, which would allow the government additional time to bring a case past the statute of limitations, according to people briefed on the matter. The SEC, meanwhile, is weighing whether to file a civil fraud lawsuit against the fund connected to the drug-stock trades.

All this comes as a Feb. 14 cutoff approaches for SAC clients to ask for their money back. The fund has told employees that it expects at least $1 billion in withdrawals from the $14 billion fund amid the intensifying investigation. SAC has a standard quarterly redemption deadline.

Several other factors could make it difficult for the government to implicate Cohen. SAC is well known for its aggressive, rapid-fire trading style, and several former employees say that there is nothing unusual about the fund's exiting a large position over just a few days.

"It's one thing to bring an insider trading charge against a market novice who pours his 401(k) into a stock after hanging up the phone with an insider," said Morris J. Fodeman, a former prosecutor and now a white-collar criminal defense lawyer at Wilson Sonsini Goodrich & Rosati. "But it's far more difficult to make a case against a sophisticated hedge fund that routinely takes large positions and employs complex trading strategies."

Moreover, both inside and outside SAC, there had been much controversy and debate surrounding the effectiveness of the Alzheimer's drug, called bapineuzumab, leading up to the July 2008 release of the companies' clinical results. Martoma's colleagues in SAC's health care group raised specific concerns with Cohen about the wisdom of holding such a large position in the two companies. And while preliminary data announced by Elan and Wyeth in June offered encouraging news, they also suggested potential problems.

On July 11, another Wall Street analyst, Jonathan Aschoff at Brean Murray Carret, said he had "numerous concerns," stoking "pessimism" over the clinical development of the drug.

The uncertainty relating to the Alzheimer drug's clinical results could help explain what led Cohen to hedge SAC's position so that it had "neutral exposure," in Wall Street parlance, heading into the disclosure of the trial results.

The short positions that SAC established in Elan and Wyeth were matched almost perfectly to offset an equity swap that effectively provided the fund with exposure to 12 million Wyeth shares, according to the SAC documents. An equity swap mimics ordinary shares and gives investors like hedge funds the benefits of stock ownership without actually owning the shares. Funds often use these complex derivatives to accumulate a large position but not tip off the market.

When government officials announced the case against Martoma, they made no mention of the swap. Instead, they emphasized how SAC had jettisoned its Elan and Wyeth shares and then brazenly accumulated short positions in both companies.

"The charges unsealed today describe cheating -- coming and going," Preet Bharara, the U.S. attorney in Manhattan, said in opening remarks during the press conference. "Specifically, insider trading first on the long side, and then on the short side."

The government noted the swap position in its court papers, but did not factor it into SAC's overall gains and losses in Elan and Wyeth. Because SAC did not trade the Wyeth swap, instead leaving the position in place, it could not be part of any insider trading charge.

Representatives for the U.S. attorney's office and the SEC declined to comment. An SAC spokesman declined to comment, as did Charles A. Stillman, the lawyer for Martoma.